Accept Credit Cards Research Articles

Predicting the determinants of the NFC-enabled mobile credit card acceptance: A neural networks approach

The main aim of this study is to determine the factors influencing the adoption of Near Field Communication (NFC)-enabled mobile credit card, an innovation in contactless payment for the future generation. Constructs from psychological science, trust-based and behavioral control theories were incorporated into the parsimonious TAM. Using empirical data and Structural Equation Modeling-Artificial Neural Networks approach together with multi group analysis, the effects of social influence, personal innovativeness in information technology, trust, perceived financial cost, perceived usefulness and perceived ease of use were examined. The significance of indirect effects was examined using the bias-corrected percentile with two-tailed significance through bootstrapping. Gender, age, experience and usage were introduced as the moderator variables with industry being the control variable in the research model. The scarcity in studies regarding the moderating effects of these variables warranted the needs to further investigate their impacts. The mediating effect of perceived usefulness was examined using the Baron–Kenny’s technique. The findings of this study have provided invaluable theoretical, methodological and managerial implications and will contribute to the decision making process by CEOs, managers, manufacturers and policy makers from the mobile manufacturing industry, businesses and financial institutions, mobile commerce, mobile telecommunication providers, mobile marketers, private or government practitioners and etc.

Taming Credit Card Fees by Requiring the Biggest Banks to Compete for Merchant Acceptance: An Inter-Bank Competitive Model

In the multi-district class action In re: Payment Card Interchange Fee and Merchant Discount Antitrust Litigation merchants claim that the fees they pay to accept Visa and MasterCard cards are too high because the banks issuing those cards do not compete for card acceptance. Because so many of their customers rely on Visa and MasterCard cards, the merchants contend that they cannot stop accepting either brand in toto. They would risk losing too many customers. But if the banks had to compete with each other, the merchants believe, they might credibly threaten to refuse one bank’s cards, forcing it to lower its acceptance fees. The merchants also contend that they could apply competitive pressure on the card-issuing banks by steering their customers to payment mechanisms that are less expensive than credit cards. Visa and MasterCard, however, prohibit merchants from pursuing these strategies. Without the ability to spur competition, the merchants contend, the card networks’ default interchange fee is the proverbial offer they can’t refuse.In 2005, the merchants filed a class action alleging that the card networks’ rules restrained competition on card acceptance fees and thus violated the antitrust laws. After seven years of litigation and negotiation, the case has entered a settlement phase. Visa and MasterCard have offered to (1) pay the merchants approximately $7.25 billion and (2) relax their rules restraining merchants from steering their customers toward less expensive payment mechanisms. The proposed settlement, however, would not alter the rules requiring merchants to accept all Visa or MasterCard credit cards regardless of the issuing bank.This article shows that simply empowering merchants to steer customers to less expensive payment mechanisms through discounting or surcharging cannot sufficiently address the competitive problem with card acceptance fees. Restrictions in the settlement would likely prevent most merchants from using these competitive devices, and if merchants were given unfettered discretion to steer their customers, consumers could be worse off than they are now. Merchants should instead be empowered to accept credit cards on an issuer-by-issuer basis. This intuitively obvious solution has traditionally been criticized on the ground that it would undermine the efficiency of the credit card system. The dramatic growth and popularity of credit card networks demonstrates, the critics argue, that they have been doing something right. Compelling millions of card-accepting merchants to enter individual fee agreements with thousands of card-issuing banks would impose transaction costs swamping any possible savings from more competitive interchange fee setting. And the patchwork of card acceptance could frustrate and anger cardholders.This article proposes an inter-bank competitive model that would produce virtually all of the benefits of issuer-based-acceptance-fee competition with virtually none of the feared inefficiencies. Visa and MasterCard would be permitted to continue to operate exactly as they do now with one exception – any merchant could insist that one or more of the four largest card-issuing banks offer it a bilateral card acceptance fee below the networks’ default rates. Replacing the customer steering provisions in the proposed settlement with this inter-bank competitive model and revising the release provisions to exclude anticompetitive conduct relating to unforeseeable market conditions would likely satisfy the objecting merchants and thus enable relatively quick court approval, ending years of continuous litigation in credit-card markets. It would also stand a significantly better chance than the proposed settlement of actually bringing meaningful competition to the credit card acceptance-fee market.

Understanding the Merchant Credit Card Acceptance Fee Class Action Settlement Proposal

The seven-year legal battle between merchants that accept credit cards, on one side, and Visa, MasterCard, and the largest card-issuing banks, on the other, has entered a settlement phase. Unlike settlements in standard law suits where the parties can freely agree to any terms they choose, in a class action, the court must (1) provide class members with the opportunity to object and (2) determine that the compromise “is fair, reasonable, and adequate.” Although this part of the case promises to be no less controversial than its predecessors, it should move to resolution much more quickly. By the end of 2013, the trial court is likely to decide whether to grant final approval to the settlement.This paper briefly reviews the history of antitrust attacks on the fees that merchants pay to accept credit cards, including a detailed discussion of the allegations in the complaint in In re: Payment Card and Merchant Discount Antitrust Litigation. It then explains the complicated proposed settlement in this case, working through the provisions relating to (1) damages, (2) injunctive relief, and (3) the releases from future liability that the class members would provide to the defendants. Finally, this paper analyzes the settlement’s policy implications and legality, predicting that the court will not approve the b(2) mandatory injunctive relief class, but it may approve the b(3) opt out damages class. Whether that result would be acceptable to the parties on either side remains to be seen.

STUDENT PERCEPTIONS OF BUSINESS COMPLIANCE WITH PAYMENT CARD INDUSTRY SECURITY REQUIREMENTS: A CONSTRUCTIVIST APPROACH

Introducing students to industry standards supports one of the basic aspects of constructivism in that using standards in the classroom provides real world and authentic information from which students can develop, or construct, knowledge. Since students come to the classroom with some familiarity with data security, use of the PCI DSS requirements in classroom activities provides the means by which students can explore new information that both challenges and enhances their preexisting concepts of security. The challenges students face in ranking the difficulty of PCI DSS compliance for business represents a challenge that is also experienced by business owners. Before information systems students are able to help businesses manage risks associated with accepting credit cards, it is important to first educate them about the PCI DSS requirements. Using the constructivist approach, the first step is to understand where students are before creating activities to take them further. This paper presents a study that examines students’ perceptions of the PCI DSS requirements. Specifically, the data illustrates the desire to know what students thought about the difficulties business face when complying with the 12 requirements in the PCI DSS in order to allow students to explore the complexities of data security.

Should Modern Retail Target the Upper or Lower Middle Class? A Customer Selection Dilemma in Emerging Markets

The paper investigates early stage “modern” grocery retail adoption in an emerging market using primary household level panel data on grocery purchases in India’s largest city, Mumbai. Specifically, we seek insight on which socioeconomic class is more likely to adopt, and why. We model adoption as a two stage process of modern retail choice followed by category expenditures within a shopping trip. We find a non-monotonic (V shaped) relationship between socioeconomic class and preferences for modern retail; specifically modern retail spend and relative preference are greater among the upper and lower middle classes, relative to the middle-middle class. Upper middle class preference of modern retail is driven by credit card acceptance, shorter store distance (relative to other segments) and higher vehicle ownership; while lower prices and low travel costs drive the preferences of the lower middle class. Modern retail is preferred more for branded and less for perishable categories. Interestingly, the lower middle class share of modern grocery retail’s revenues is largest and this share is projected to grow as prices fall and store density increases. To address concerns of endogeneity and generalizability, we replicate the key results with a “conjoint” type study with exogenous variation in price and distance, in two cities—Mumbai and Bangalore. We discuss implications for targeting and public policy in emerging markets.

Card Acceptance and Surcharging: The Role of Costs and Competition

The payment cards market is a two-sided market. Cost sensitivity of both consumers and merchants for card services influences total demand. Survey data of Dutch merchants shows that costs, and competition affect acceptance as well as surcharging decisions. Merchants who find payment cards expensive are less likely to accept them and more likely to surcharge their customers for using them. Merchants who face any competition accept debit card payments relatively more often than merchants with monopoly power, and they are less likely to surcharge their customers for debit card usage. Intense competition leads to higher credit card acceptance.

Card Acceptance and Surcharging: the Role of Costs and Competition

The payment cards market is a two-sided market. Cost sensitivity of both consumers and merchants for card services influences total demand. Survey data of Dutch merchants shows that costs and cost perception affect acceptance as well as surcharging decisions. Merchants who find payment cards expensive are less likely to accept them and more likely to surcharge their customers for using them. Merchants who face any competition accept debit card payments relatively more often than merchants with monopoly power, and they are less likely to surcharge their customers for debit card usage. Intense competition leads to higher credit card acceptance.

Problem of ATMs in Japan not accepting credit cards carried by foreign tourists

Problem of ATMs in Japan not accepting credit cards carried by foreign tourists

Payment Card Industry Data Security Standard Compliance in Restaurants

ABSTRACT In order to improve the security of customer data, the credit card companies have come together to create a security standard called the Payment Card Industry Data Security Standard (PCI DSS), which involves mandatory requirements for merchants that accept credit card transactions. All restaurants that accept a credit card must comply with PCI DSS. The purpose of the study was to examine the PCI DSS compliance levels of quick-service, casual/family, and fine dining restaurants. A random sample of one thousand restaurant managers who are in charge of information technology at their companies and were subscribers of Hospitality Technology magazine were surveyed. One hundred ninety managers responded to the survey. The results indicate that restaurants are far from full compliance with PCI DSS. This may have significant financial and non-financial consequences for restaurant owners and operators.

Yes, You Should Accept Credit Cards

Yes, You Should Accept Credit Cards

The choice at the checkout: Quantifying demand across payment instruments

Dramatic changes have occurred in the U.S. payment system over the past two decades, most notably an explosion in electronic card-based payments. This shift has led to a series of policy debates driven in part by consumers' choice of payment instruments. Using a new nationally representative survey, we transform consumer responses to open-ended questions into product rankings and estimate a characteristics-based rank-order logit model in order to quantify consumer substitution among payment methods. Our estimates are then used to conduct supply-driven and demand-driven counterfactual experiments in order to estimate market share and cost effects. From a counterfactual experiment in which merchants stop accepting credit cards, we predict merchant costs to decline substantially. Because merchants accept credit cards nonetheless, we regard our finding as evidence either that the credit card networks hold market power, or that merchants experience unmeasured intangible benefits from credit card acceptance. We also predict that contactless debit will take market share from cash, checks, and credit, and that the age/cohort effect alone is unlikely to cause debit card use to increase substantially over a 10-year period.

Determinants of Merchant Participation in Credit Card Payment Schemes

This paper aims to empirically establish the determinants of merchant participation in credit card payment schemes. It is found that a merchant's personal background, type of business and total value of sales are significant in determining a merchant's acceptance of cards in payment transactions. Further, it is found that customers' usage of credit cards and other merchants’ acceptance of credit cards in payments have a significant influence on a merchant's decision. Findings also indicate that non-pecuniary strategic factors are stronger drivers and barriers to a merchant's participation in credit cards payments services compared to monetary related factors.

Priceless? Costs of Credit Card Merchant Restraints

Credit card transactions cost American merchants six times as much as cash transactions. American merchants paid nearly $40 billion to accept credit cards last year. Why, then, do consumers pay the same price for purchases, regardless of their means of payment? The answer lies in a set of credit card network rules known as merchant restraints. Merchant restraints forbid merchants from surcharging for credit and discounting for non-cash payments, while the framing effect, a well-documented cognitive bias, makes discounting for cash ineffective. Merchant restraints thus prevent merchants from pricing according to consumers' payment method and from signaling to consumers the costs of their choice of payment method. Accordingly, consumers never internalize the costs of their choice of payment system. Credit card merchant restraints lead to an over-consumption of credit, which has profound anticompetitive and social effects. This article examines how merchant restraints have distorted competition within the credit card industry and among payment systems in general. It also identifies several problematic social impacts of merchant restraints, including a regressive, sub rosa subsidization of affluent credit consumers by poor cash consumers and increased use of credit leading to increased consumer bankruptcy filings, inflation, and decreased consumer purchasing power. The article contends that the economic justifications for merchant restraints are unfounded, that merchant restraints are better understood in the context of their historical development as a solution to a legal problem that no longer exists, and that merchant restraints are clear antitrust violations. Thus, the article proposes regulatory or judicial intervention to ban merchant restraint rules.

Payment Wars: The Merchant-Bank Struggle for Control of Payment Systems

In recent years, the cost to merchants of accepting credit cards has risen without any corresponding new benefits. This trend has sparked a wide-ranging struggle between merchants and banks, as merchants have begun to seek greater control over payment systems. The conflict is playing itself out in business practices, banking regulation, IPOs, corporate governance, corporate restructuring, bank mergers, and the largest private antitrust litigation in U.S. history. This article reviews the factors behind the struggle between merchants and banks and the strategies adopted by each, and uses the framework of the merchant-bank struggle to reevaluate the relationship between banking and commerce. The article argues that the extraordinary transactional and litigation energy being spent in this fight is likely for naught. Ultimately, the growth of national bank brands, technological developments, and innovative business models will independently result in a radical reshaping of the payments world that could ease merchant-bank tensions.

A theory of credit cards

A two-period model is constructed to study the interactions among consumers, merchants, and a card issuer. The model yields the following results. First, if the issuer's cost of funds is not too high and the merchant's profit margin is sufficiently high, in every equilibrium of our model the issuer extends credit to qualified consumers, merchants accept credit cards and consumers face a positive probability of default. Second, the issuer's ability to charge higher merchant discount fees depends on the number of customers gained when credit cards are accepted. Thus, credit cards exhibit characteristics of network goods. Third, each merchant faces a prisoner's dilemma where each independently chooses to accept credit cards, however all merchants' two-period profits are reduced because of intertemporal business stealing across industries.

Endogenous credit-card acceptance in a model of precautionary demand for money

A credit-card acceptance decision by retailers is embedded into a simple model of precautionary demand for money. The model gives a new explanation for how the use of credit-cards can differ so widely across countries. Retailers’ propensity to accept cards reduces the need for buyers to hold cash as the chance of a stock-out (of cash) is reduced. When retailers make their decision with respect to credit-card acceptance they do not take into account the effect that decision has on other sellers. This externality generates multiple equilibria over some portions of the parameter space.

Who Pays for Credit Cards?

The authors model side payments in a competitive credit‐card market. If competitive retailers absorb the cost of accepting credit cards by charging a higher goods price to everyone, then someone must subsidize convenience users of credit cards to prevent them from defecting to merchants who do not accept cards. The side payment could be financed by card users who roll over balances and pay interest. It is rational for them to do so if their subjective discount rates are high enough. Charging different prices to different customers based on the underlying cost of the payment instrument would be more efficient for retailers. However, banks may offer incentives to attract convenience users because some of them may become interest‐paying users (“revolvers”) in the future.

The Neutrality of Interchange Fees in Payment Systems

There has been considerable public debate over the effect of interchange fees on credit card transactions. Regulators in Australia and Europe have argued that these fees can be set by banks to have an anticompetitive effect. In the US, it has been argued that these fees, together with a rule that prevents a surcharge for credit purchases, might create a cross subsidy between cash and credit customers. Academics have noted that, in particular circumstances, interchange fees have no real effects in the absence of such a no-surcharge rule. This paper considers two aspects of credit card interchange fees. First, it provides a general neutrality result. We show that in the absence of a no surcharge rule, interchange fees can never have any real effects. This result does not depend on the degree or nature of competition at either the bank or the merchant level. Second, we consider the potential for a bank with market power to manipulate interchange fees in the presence of a no-surcharge rule in order to raise bank profits. We show that such cross subsidisation is not profitable if there is adequate competition from 'cash only' merchants. We then consider the interaction between imperfectly competitive merchants that accept credit cards. For the special case of a single merchant, we provide both necessary and sufficient conditions on demand and the merchant's profit function for fee manipulation to be feasible. We then examine what occurs when there are multiple imperfectly competitive merchants; demonstrating that the profitability of any cross subsidisation depends critically on the nature of merchants' competitive interactions.

Why we need to use credit cards: a university experience

Describes what took place in a university when the authorities supported that credit cards should no longer be accepted for the payment of fees. Discusses the arguments for and against the use of cheques and credit cards. Suggests that continuing to accept credit cards would be more helpful to students.

Correlates of credit card acceptance and usage in an advanced developing Middle Eastern country

Past studies indicate that there is a close relationship between spread of credit card usage in a country and its stage of socio‐economic development. With increased level of socio‐economic and technological development, credit card usage particularly increases in developing countries. Studies credit card usage behavior in an advanced developing country – Turkey. An empirical research study conducted in urban Turkey indicates that there are certain relationships between socio‐economic and demographic characteristics of Turkish consumers and their credit cardholding and usage behaviors. In light of the survey findings, offers a number of marketing strategy guidelines for credit card issuers in developing countries to remain competitive as well as creating more market growth opportunities in this growing service industry.